Deciding How Much Loan You Can Afford

Man and woman bought a homeBuying a house and financing with it a mortgage comes with a big financial responsibility. Note that getting a pre-approval does not mean that you comfortably afford the monthly loan payments. The thing is some homebuyers who follow their own criteria and decide how much they can afford to become house poor later on.

When buying a house, you may want to ask lenders what they think you can afford. Mortgage companies in Ogden note that it is also advisable to assess your budget and preferences.

Monthly Income

Your source of income is also your source of monthly payment. It’s a relief when you can rely on a partner’s income to cover other bills. If you, however, are the only one paying for the loan and other household expenses, make sure that your income is sufficient. It is also a good idea to consider your job stability or whether you could easily find another one if you lose your current position.

Debt and Expenses

Deciding what you can afford involves considering your debt and other expenses. Lenders suggest that the total should not go beyond 36% of your gross income. If your priority is to buy a house, you may want to avoid making big purchases like cars, especially if you don’t have enough budget. You should also think about the expenses that you’ll be generating in the future, like school expenses for kids.

Lifestyle and Habits

Your habits and lifestyle matter when determining how much how you can afford. If you’re willing to sacrifice your monthly shopping habit or tighten your budget a little bit, you may be able to afford the loan payments. If you cannot survive the mornings without an expensive coffee, however, you’ll have a problem. You will need to give up some splurges and budget your money.

Don’t buy a house that is beyond what you can afford. This is even if you believe you’ll receive a raise in the near future. Always consider your current situation and ask the help of the reputable lender to make you help an informed decision.